April 22, 2013

What is a Durable Power of Attorney? Should I have a Durable Power of Attorney as part of my estate plan?

Although sometimes used in specific situations like the purchase or sale of real estate, a Durable Power of Attorney is one of the key estate planning tools that we ask all of our clients to consider when formulating their estate plans.

Michigan is one of a number of states that recognizes, by statute, the legal concept known as a Durable Power of Attorney. A Durable Power of Attorney is a written document by which a person called the “principal” designates another to act on behalf of that person, becoming the principal’s “attorney in fact.” The written document must contain words that show that the principal intends that the attorney in fact has the power to act despite the principal’s subsequent incapacity or disability. A Durable Power of Attorney has no expiration date unless the Durable Power of Attorney explicitly states otherwise.

As the principal, it is up to you to determine whether the Durable Power of Attorney should take effect immediately when signed, or only upon your incapacity or disability (called a springing power). There are pros and cons to each which should be discussed with your attorney. Older clients or those who suffer from debilitating illness often want their Durable Powers of Attorney to take effect immediately. On the other hand, healthy individuals may be reluctant to appoint someone to handle their affairs when they can handle those affairs themselves and there is no immediate or pressing need.

Who should you appoint as your attorney in fact under a Durable Power of Attorney? A person that you trust implicitly is the person you should appoint to be your attorney in fact. Although you can expand or restrict the powers of the person you appoint, it is important to understand that your attorney in fact will have the ability to make certain decisions for you that will directly effect your financial affairs and personal well-being. Obviously, it is extremely important that you choose this person carefully.